API: Election Makes RFS Reform Unlikely

The EPA is required by law to set the new Renewable Fuel Standard volumes by Nov. 30 each year. (DTN/The Progressive Farmer file photo by Jim Patrico)

OMAHA (DTN) -- Any talk of Congressional reform of the Renewable Fuel Standard may have gone up in smoke following the recent election, as a spokesperson for the American Petroleum Institute told reporters on Monday the biofuels industry may be more secure than before the election.

In the past two years, the Republican-controlled Congress held hearings and introduced RFS reform legislation, but the RFS has enjoyed wide bipartisan support since it was passed into law more than a decade ago.

There have been some bipartisan efforts at reform offered up, but none of them gained traction in recent years.

"Moving a comprehensive RFS reform package has been difficult," said Frank Macchiarola, API downstream group director. "Reform is more difficult with the next Congress. It doesn't appear RFS reform is a priority for Congress at this point. It appears Congressional action on the RFS gets more and more difficult."

The EPA is slated to release the final 2019 RFS renewable volume obligations on Nov. 30.

Macchiarola said API is calling for those volumes to more closely follow fuel market realities. Currently, ethanol accounts for about 10.6% of the fuel supply.

API called on EPA to set the final 2019 ethanol volumes at or below 9.7%, "an amount that allows for E0 sales and recognizes the vehicle and infrastructure constraints that limit the ability to use E15 and E85," the group said in a news release.

If history is a guide, Macchiarola said, he doesn't expect the EPA's final volumes to change much, if at all, from the proposal.

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On June 26, 2018, EPA proposed a total renewable fuel volume of 19.88 billion gallons. That includes 4.88 billion gallons of advanced biofuel, including 381 million gallons of cellulosic biofuel. That would leave in place the 15-billion-gallon requirement for corn ethanol and other conventional biofuels.

The Renewable Fuels Association (RFA) and other biofuel and agriculture interest groups, however, have expressed concern that EPA has not accounted for gallons lost to small-refinery waivers. In public comments submitted by the RFA, the group asked EPA to account for the small-refinery waivers when it calculates the renewable volume obligation (RVO) percentages.

In 2016 and 2017, the EPA granted 48 small-refinery waivers to the RFS, meaning about 2.25 billion gallons of biofuels were not blended those years. So far in 2018, the agency has received 15 waiver requests and has approved zero. Biofuel interests are hopeful EPA Acting Administrator Andrew Wheeler will be more deliberate when considering waivers.

In addition, EPA is expected to propose a rule to allow year-round E15 sales by sometime in February 2019. That is expected to include reforms to the market for renewable identification numbers, or RINs.

"Consumers need to know that the RFS is a prime example of the government putting its thumb on the scale and picking winners and losers," Macchiarola said. "Implementing this broken program year after year is not a practical energy strategy for our future. The reality is that market forces, technological innovations and investments by the oil and natural gas industry have combined to necessitate reforms to this RFS program."

Renewable Fuels Association President and CEO Geoff Cooper said EPA has a chance with the new rule to make changes to the RFS to benefit biofuels.

"This final rule presents EPA with a golden opportunity to make things right and put the sordid small-refiner exemption episode behind us once and for all," he said.

EPA should project the volume of any small-refiner exemptions it expects to issue in 2019, Cooper said, effectively reallocating the lost volume to non-exempted refiners.

"That said, with record RIN stocks and RINs trading for less than a dime, there is absolutely no way a small refiner could claim the RFS is causing economic harm," he said.

In addition, Cooper said as required by courts, EPA should "add back the 500 million gallons of conventional biofuel blending requirements that were inappropriately taken away from the 2016 RVO" as a result of EPA's "improper use" of its waiver authority.

"Taking these two steps, along with expediting the rulemaking to allow year-round E15 would begin to repair the lingering damage that former Administrator (Scott) Pruitt did to America's ethanol industry and farm economy," he said.

EPA is required by law to finalize the following year's RFS volumes by Nov. 30 of the preceding year. The agency has previously missed the annual deadline, but is expected to meet the date this year.

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Todd Neeley

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